Brokerages revoke restrictions on trading margin, exposure limits

SummaryWith the stock markets having passed through the extreme volatility risks posed by election results, brokerages have revoked the restrictions imposed on trading with regard to margins and exposure limits availed of by investors

With the stock markets having passed through the extreme volatility risks posed by election results, brokerages have revoked the restrictions imposed on trading with regard to margins and exposure limits availed of by investors. Ahead of the election results on May 16, brokers had lowered the permitted trading margin and exposure limits for their clients to minimise risks from extreme volatility and any possible systemic risks.

As no such systemic risks emerged in the markets, given robust systems and additional arrangements made by the regulators, exchanges and other authorities, the brokers have now decided to restore the margins and exposure limits to normal levels.

The brokerages had earlier reduced exposures in intra-day as well as delivery based trade from May 13 as part of their efforts to guard against excessive volatility. “Considering the risk and protection of investor interest on account of elections result volatility, intra-day exposure is reduced to six times and delivery-based trade exposure is limited to two times,” Indiabulls Securities had said in a communication to clients.

“This would come into effect from May 13 till further communication,” it had added. The move came as exit polls were predicting a victory for the BJP-led NDA in the elections.

Indiabulls has now informed its clients that “with immediate effect the exposure limits are restored to normal”. Similar circulars have been issued by other brokerages as well to their respective clients. The Sensex surged nearly 650 points on May 9 and again climbed over 550 points on the successive trading day (May 12), when the exits polls predicted victory for the BJP-NDA. It again climbed by 320 points on May 13. The Sensex slipped by 56 points on May 14 and rebounded by 90 points on the next day.